As technology services provider EOH seeks to cut its debt load, the company is now selling off its stake in Twenty Third Century Systems (TTCS) and its subsidiaries for R122 million.
The Johannesburg-based company announced to shareholders today that it would sell its stake in TTCS, a Pan-African IT applications and business solutions provider.
TTCS has offices in Zimbabwe, Zambia, Malawi, Kenya, Uganda, Rwanda, Botswana and Nigeria, and projects in several other countries, including Ghana, Namibia, Tanzania and Cameroon.
In a statement, EOH says: “Agreements have been entered into for the disposal of EOH’s 49% shareholding in Twenty Third Century Systems and its 100% shareholdings in Enablemed, which are expected to close imminently, as well as the sale of its 100% shareholdings in Afon and iSquared, and its 51% shareholding in Sukema, which have already closed, with a combined consideration of an additional approximate R122 million.”
TTCS was founded by Zimbabwean-born businessman Ellman Chanakira in 1996, focused on implementing business solutions (as well as IT infrastructure) across Africa and the Middle East. It operates in both the private and public sectors, including the social security, tax and revenue collecting agencies.
The debt-saddled EOH says it plans to use the money to reduce its leverage and strengthen its balance sheet.
EOH holds a 49% equity stake TTCS and its subsidiaries.
Six-month hell
The JSE-listed EOH has been revamping itself for the past few months and has adopted a more market-oriented corporate identity since Stephen van Coller took over as CEO, following a spate of bad moves by the previous executive.
Van Coller says: “It has been a challenging six-month period but the group has made meaningful progress on a number of fronts. I am pleased to have a new board in place with experienced professionals that can work with the executive team and as we future-proof EOH. I have every confidence the fundamental strengths of the business and its people will prevail in the longer term, notwithstanding the pressures the business is facing.”
In a pre-closing statement this morning, shared on SENS, EOH says the sale of its non-core assets is progressing steadily and it has already achieved over 50% of its targeted R1 billion of disposals to reduce debt levels.
Last month, EOH sold another asset, Construction Computer Software (CCS), to RIB Limited, for R444 million.
“Following receipt of the sale proceeds from the disposal of 70% of CCS, EOH has repaid the R250 million bridge loan provided by its bankers and expects further progress with deleveraging in the coming months.”
EOH says it is working to improve its balance sheet efficiency and is also paying its debts.
“EOH expects to have availability of R400 million of its overdraft facilities, reducing the historical debt levels, while still retaining a strong cash balance of approximately R700 million expected at year-end.’’
With exactly 12 weeks before announcing full year-end financial results, EOH is lamenting trading conditions, which it says remain under pressure due to the weak macro environment.
Governance issues
The company says it has also been negatively impacted due to concerns around governance.
EOH’s problems surfaced after software giant Microsoft in February terminated its contract with the IT services company after an anonymous whistle-blower reportedly filed a complaint with the United States Securities and Exchange Commission about alleged malfeasance to do with a R120 million contract with the SA Department of Defence.
EOH then asked law firm ENSAfrica to conduct a proactive comprehensive investigation into the IT services company’s contracts to identify any wrongdoing or criminal conduct in the acquisition, award or execution of contracts.
Last month, the company said the probe found suspicious transactions of R1.2 billion and are being investigated by ENSafrica.
Over the past year, the company's stock has plummeted 71.9% and its market cap is now sitting at around R3 billion.
EOH today reiterated this resulted in revenue remaining under pressure, which has increased further in the second half of the year, in part due to one-off hardware sales not being repeated in the second half of the year.
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